Amid the cost of living crisis, British households are often looking for ways to make their money go further, and savings accounts can help after the Autumn Budget raises taxes.
The Bank of England’s (BoE) choice to hold interest rates steady at 4% in November is good news for savers as it affects the rates banks and building societies set on their products.
Inflation data showed that the UK Consumer Price Index (CPI) fell to 3.6% in October, down from 3.8% in September.
This has triggered expectations that the Bank of England may cut interest rates in December. Markets put a 90% chance of the Bank of England cutting interest rates by 0.25% this month, up from 85% earlier in the week before the budget.
Experts are urging savers to shop around for the best deals and review their accounts regularly, as many may still be holding onto products that do not protect against inflation.
Mark Hicks, head of active savings at Hargreaves Lansdown, said: “Inflation may have eased a bit but is still ahead of ordinary savings.”
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“It’s more important than ever to shop around and consider online banks and savings platforms as there are still a large number of accounts out there that are well ahead of inflation,” he said.
Hicks added: “It’s also well worth considering locking in a fixed-rate deal now for funds you won’t need for a specific period.”
Reeves announced changes to savings income. From 2027-28, the basic savings rate will increase by 2 percentage points to 22%, the higher savings rate will increase by 2 percentage points to 42%, and the savings surcharge rate will increase by 2 percentage points to 47%. This regulation will come into effect on April 6, 2027.
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Gary Smith, senior partner in financial planning at wealth management firm Evelyn Partners, said: “With the freeze on personal savings allowances and the impending ISA reforms, savers may be particularly wondering what to do with their cash.
“The income stream from cash deposits has been reduced by falling interest rates, so if savings face tax, the final net return may be meager indeed.”
Easy-to-use accounts allow you to access funds when you need them. A fixed term means you cannot withdraw cash during the transaction. They often offer better interest rates, but you have to be comfortable not touching your savings for a longer period of time (usually one to five years).
Until recently, savers could earn a market-leading interest rate of 5% over three months, but Investec’s best offer is a one-year rate of 4.5%. Interest is paid on maturity and the minimum investment is £5,000.
GB Bank signed a 4.5% one-year agreement through investment platform Prosper. Interest is paid monthly or on maturity and you can invest from £20,000 to £100,000.
LVH Bank pays an interest rate of 4.46% on the one-year agreement. Interest is paid on maturity and you can invest from £1,000 to £1,000,000.
Online banks often offer higher interest rates than traditional brick-and-mortar branches, which means better returns and a more efficient way for you to save and achieve your financial goals.
If you prefer to go with a familiar name, high street lenders are offering slightly lower prices but still above the rate of inflation.
Tesco (TSCO.L) Bank offers the highest interest rates among the high street banks, with a one-year fixed-rate savings account at 4.21% per annum and a minimum balance requirement of £2,000. However, you can invest up to £5 million.
NatWest (NWG.L) has a fixed savings account with an interest rate of 3.7% a year. The minimum deposit is just £1, with interest payable on the first working day of every month and on the maturity date.
Unlike easy-to-use products where interest rates can change, fixed-rate accounts earn a fixed rate for the term you choose, whether that’s six months or several years. These are the most common offers, but some offer terms as long as 10 years or more.
You must keep your initial deposit for a fixed period and no withdrawals are allowed. If you touch your money, you lose any interest.
Easy-to-access savings accounts let you withdraw funds without notification. Due to this easy access comes lower interest rates, but they are a good option for those who think they may need money urgently.
Note that the interest rates on these accounts are variable, meaning they can go up or down. You will be notified in advance of any changes.
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Monument offers a market-leading 4.51% deal, but you do need at least £25,000 to open an account. Interest is paid monthly and you can invest up to £2 million.
Chase (JPM) is offering 4.5% off for 12 months, so you can get it for just £1.
Cahoot is offering a 4.40% discount, you can open from just £1 and save up to £2,000,000. If you deposited £1,000 into the account, your balance after 12 months would be £1,044.
There are even easy-to-access accounts that pay higher, but they are not suitable for new customers. For example, Santander’s (BNC.L) Edge Saver offers a 6% interest rate, but it’s only available to current account holders.
Can’t decide if you want to put your money away and not touch it for a long time, or have it always accessible? Maybe you should consider opening a notice savings account.
Notification savings accounts require you to notify your savings provider before withdrawing funds.
These are ideal for people who know when they might need cash but don’t want to have to dip into it all the time.
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You need to give your bank or building society advance warning before you withdraw your money. Usually 30 to 120 days, but can be longer.
OakNorth has the highest offer of the week, trading at 4.54%, with entry available for just one pound. The notice period is 95 days.
Earl Shilton BS pays 4.50% interest with a 180 day notice period and a minimum deposit of £5,000.
StreamBank is offering a 90-day discount of 4.45%, so you can get it for just £1,000.
Interest rates on notice accounts are variable, meaning the interest rate may increase or decrease over time.
For those looking to make the most of their cash savings, a regular savings account can offer a 7.5% return.
Most regular savings accounts require you to deposit funds monthly and pay interest annually. It’s not uncommon for this offer to be offered to current customers only.
The principality offers an interest rate of 7.5% on a six-month term savings account. You open an account and pay up to £200 per month. Interest is calculated daily on the funds in the account and is paid six months after the account is opened.
Zopa pays 7.1% interest on deposits of up to £300 per month. Account holders also receive 2% AER interest on all balances and 2% cashback on bill payments, with no minimum monthly deposit required.
Progressive Building Society’s regular savings account offers an interest rate of 7% and allows deposits of up to £300 per month.
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Cooperative banks are offering a 7% discount to existing customers. With a fixed term of one year, you can save up to £250 per month and skip months without penalty.
First Direct pays the same 7%, but you save £300 a month.
Every transaction mentioned here is protected by the Financial Services Compensation Scheme, so you’re protected up to £85,000, or double if it’s a joint account.
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